“Board governance” has been a buzz phrase in corporate America considering the fact that Enron, the world’s biggest power corporation, all of a sudden filed for bankruptcy in 2001. Now the term is becoming a part of the vernacular of just about just about every nonprofit organization in America.
Sarbanes-Oxley (SOX) is usually a difficult law that was passed in 2002, inside the wake of your Enron bankruptcy. It ushers in new principles of independence and accountability for boards of directors of public corporations, and it is most likely to influence the outcome of future lawsuits brought against nonprofit corporations and boards - despite the fact that, technically, the law does not apply to them. Nonetheless, the law is regarded because the “gold standard” for governance and accountability.
In actual fact, it is basically a myth that SOX does not influence nonprofit organizations. Despite the fact that nonpublic corporations aren’t at the moment topic to Sarbanes- Oxley, they may be accountable to their stakeholders (by way of example, donors, members, and granting authorities). Accordingly, most lawyers agree (for the extent that lawyers ever agree on something) that nonprofit organizations should really move toward voluntarily adopting many of the governance requirements offered in SOX. These protective measures include things like adopting whistle-blower and document-retention policies, installing independent board members, establishing audit and compensation committees, evaluating board members, and also other measures.
